The U.S. is a continent-wide single market with free movement across state lines. This has driven economic development since the 19th century. It encouraged mass production, national distribution and labor mobility.
That calculus is changing as services, from home repair to hospitality to health care, make up a bigger chunk of personal spending and a higher proportion of jobs. You can still build a successful enterprise that spreads costs over a huge customer base — see Amazon.com Inc. or Alphabet Inc. (Google) — but many of today’s service jobs are done directly for consumers. They’re in-person and inherently local. Physical therapists and personal trainers can’t telecommute. That makes where people live all the more important to their incomes.
Economists worry that Americans are not moving to where their skills are most in demand. Migration rates have been dropping since the 1980s. The states with the highest incomes also used to have the fastest-growing populations, as Americans moved to places with better jobs. That’s no longer the case. Workers seem stuck.
(Related: House Members File Producer Licensing Bill)
“The interstate migration rate is half of what it was in 1980,” says Janna E. Johnson, an economist at the University of Minnesota’s Humphrey School of Public Affairs. One factor appears to be the high cost of housing in the most productive parts of the country. Another is the spread of occupational licensing.
About one in four Americans work in jobs that require licenses, up from a mere 5% in 1950, and the requirements continue to expand to new occupations. Each state determines its own licensing requirements, so a licensed professional in one state may find it hard to move to another. “A licensed public schoolteacher with a decade of teaching experience in New Hampshire is not legally allowed to teach in an Illinois public school without completing significant new coursework and apprenticeships,” write Johnson and her Minnesota colleague Morris Kleiner in a new working paper that tries to tease out how much licensing limits mobility.
It’s a tricky problem. For starters, notes Johnson, moving “is a pretty rare event.” Only about 2.5% of the population moves between states in a given year. So you need a large dataset to do statistical analysis — and an especially large one to break down migrants by occupation. The economists used the Census Bureau’s American Community Survey, which contains detailed migration and occupation information on more than 15 million people. It records moves both across state lines and within states and further distinguishes between people who moved within the same local area and those who moved between different areas in the same state.
The intrastate distinction helps get around another problem. If your job depends on a network of clients, as many licensed jobs do, it’s hard to move, regardless of legal requirements. Some years back, a contractor doing work in my Los Angeles condo voiced envy at the life of a cousin in Arlington, Texas, midway between Dallas and Fort Worth. There, he said, “You can buy a million-dollar house for $200,000.” He’d like to move, he said, but all his customers were in Southern California. It would be too difficult to start over. A new license was the least of his worries.